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Here's Why You Should Hold Onto Comerica (CMA) Stock Now

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·3 min read
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  • CMA
  • SHBI
  • SFST

Comerica Incorporated CMA continues to gain from improving organic growth and controlled expenses, while a lack of loan portfolio diversification and significant exposure to certain challenging economies remain near-term headwinds.

The Zacks Consensus Estimate for CMA’s 2021 and 2022 earnings has been revised marginally upward over the past 30 days. The stock currently carries a Zacks Rank #3 (Hold).

Shares of Comerica have gained 8.7% in the past six months, outpacing 0.4% growth for the industry. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Zacks Investment Research
Zacks Investment Research

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Comerica has witnessed continued organic growth in the past few years. Total loans witnessed a five-year (ended 2020) compound annual growth rate (CAGR of 1.6%, which possibly boosted CMA’s net interest income (NII). NII saw a CAGR of 1.5% over the last five years (2016-2020), with some yearly fluctuations. However, both metrics witnessed a decline in the first nine months of 2021. Nevertheless, in a gradual recovering economy and with the improving loan commitments, CMA’s loan balance is anticipated to show a steady improvement, thereby stoking NII growth.

Despite the ongoing investments in technology and other expenses, Comerica’s non-interest expenses witnessed a negative five-year CAGR of 1.9% (ended 2020). Though costs escalated in the first nine months of 2021 due to continued investments in technology and other expenses, the same is likely to remain under control with support from the GEAR Up initiatives. Moreover, management expects non-interest expenses to decrease in the fourth quarter of 2021 on lower compensation, partially offset by higher seasonal expenses and technology investments. Such strategies aimed at expense control will likely alleviate the bottom-line pressure.

Despite its ongoing efforts in geographical diversification, Comerica derives a significant chunk of its total revenues from California and Michigan where the economic environment has continued to be increasingly arduous over the past few years. Therefore, any economic or political doldrums in these markets will likely affect the CMA’s performance.

Further, a bulk of Comerica’s loan portfolio — nearly 82% as of Sep 30, 2021 — comprises commercial and commercial mortgage loans. Such a lack of diversification can be precarious for CMA amid an uncertain economy.

Stocks to Consider

Some better-ranked stocks in the banking space are Shore Bancshares SHBI, Southern First Bancshares SFST and Colony Bankcorp, Inc. CBAN. At present, SHBI sports a Zacks Rank #1, while SFST and CBAN carry a Zacks Rank #2 (Buy) each.

Over the past year, the stock of Shore Bancshares has jumped 42%, whereas shares of Southern First and Colony Bankcorp have gained 80.8% and 23.9%, respectively.

Over the past 30 days, the Zacks Consensus Estimate for Shore Bancshares’ current-year earnings has been revised 21.7% upward, while that of Southern First has moved 9.1% north. Current-year earnings estimates for Colony Bankcorp have moved 15.2% up over the past two months.

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Comerica Incorporated (CMA) : Free Stock Analysis Report

Shore Bancshares Inc (SHBI) : Free Stock Analysis Report

Southern First Bancshares, Inc. (SFST) : Free Stock Analysis Report

Colony Bankcorp, Inc. (CBAN) : Free Stock Analysis Report

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Zacks Investment Research